iifl-logo-icon 1

SAL Automotive Ltd Management Discussions

515
(1.98%)
Jul 16, 2024|11:02:00 AM

SAL Automotive Ltd Share Price Management Discussions

COMPANY PROFILE

SAL Automotive Limited (SAL) is a manufacturer of automotive components and agricultural implements. We take pride in being the preferred supplier to leading manufacturers of passenger vehicles, commercial vehicles, and tractors. Our diverse product line encompasses a range of high-quality offerings, including seats, seat mechanisms, and seat frames.

In addition to our automotive component production, we also specialize in manufacturing top-notch agricultural implements. Our portfolio includes products such as Rotavators, planters, Rotary Tillers, Box Scrapper, and tractor trolleys, which are designed to meet the unique needs of the agricultural sector.

At SAL, we are committed to delivering excellence in both the automotive and agricultural industries, ensuring our customers receive top-tier products and solutions.

FINANCIALS OVERVIEW

While details of financial position and performance are available in the Balance Sheet, Statement of Profit & Loss, along with related notes, key aspects are highlighted in the following paragraphs:

– Revenue

(Rs. in Crores)

Particulars 2022-23 2021-22
Automotive Components: - 138.35 104.12
– Seats for Tractor & Commercial Vehicle 75.43 64.24
– Seat Mechanisms 22.54 17.80
– Seat Frames 25.67 11.99
– Others 14.71 10.09
Agriculture implements 165.44 46.46
– Rotavators 165.43 45.91
– Veg Planter & Others 0.01 0.55
Net Revenue from Operations 303.79 150.58
Other Income 1.53 1.54
Total Revenue 305.32 152.12

– Equity & Reserves

The Companys net worth as on 31st March, 2023 stood at Rs. 34.95 crores (previous year Rs 30.34 crore) comprising of an Equity component of Rs. 2.40 crore (previous year Rs 2.40 crore) and Reserves & Surplus of Rs. 32.55 crores (previous year Rs 27.94 crores).

Book value per share having facing value of Rs 10 each is Rs 146 share (previous year Rs. 127 per share).

– Trade Receivables

Trade receivables as at 31st March, 2023 stood at Rs. 37.01 crores (previous year Rs. 34.81 crores) having debtors turnover ratio of 8.46 times (previous year 4.79 times).

– Trade Payables

Trade payables as at 31st March, 2023 stood at Rs. 50.23 crores (previous year Rs. 40.36 crores).

– Cost of Material Consumed

During FY 2022-23, the global economy experienced a post-pandemic scenario characterized by a surge in global demand.

Despite the impact on raw material costs, SALs management diligently worked to mitigate the effects and keep the expenses under control. Through their efforts, the company was able to maintain a relatively stable raw material cost as a percentage of net revenue from operations. This figure stood at 80.8%, compared to the previous years level of 78.4%. The growth in sales volume of products with higher material costs played a vital role in achieving this result.

SAL committed to adapting to market fluctuations while ensuring the production of high-quality automotive components and agricultural implements. Our focus on efficient cost management and sales growth positions us to navigate challenges successfully and deliver value to our customers in the upcoming financial year.

– Other Overheads

Consisting of personnel cost, manufacturing expenses, administrative expenses and sales & distribution expenses during the year were Rs. 47.95 crores (previous year Rs. 33.87crores).

– Depreciation & Amortization

Depreciation for the year stood at Rs. 3.08 crore against previous year figure of Rs. 2.13 crore which increased primarily due to additional Capex made during the year under review.

– Results

Reflecting the above and after considering finance cost, Profit/(Loss) before Tax was Rs. 6.20 crore (previous year (Rs. 2.99 crores). Total Comprehensive Income for the current year was Rs. 4.61 crore (previous year (Rs. 2.37 crores)).

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies Act 2013 as per the Section 133 read with rule 3 of Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.

The accounting policies have been consistently applied.

INTERNAL FINANCIAL CONTROL SYSTEMS & THEIR ADEQUACY

In FY 2022-23, SAL has implemented robust procedures to ensure effective internal control. These policies and procedures have been put in place to provide reasonable assurance that the companys assets are protected from the risks of unauthorized use or disposition. Additionally, they aim to ensure that all transactions are accurately and promptly recorded and reported.

To uphold the integrity of these controls, regular reviews are conducted during both internal and statutory audits. These evaluations assess the effectiveness of the established procedures and identify areas for improvement. Importantly, no material weaknesses were observed in the operating effectiveness of the internal financial controls tested during the year.

The Finance and Accounts function of SAL is well-equipped with a competent team of experienced and qualified personnel. This ensures the smooth functioning of financial operations and enhances the companys ability to meet its obligations effectively.

The Board of Directors and the Audit Committee play an active role in monitoring and evaluating the operational and financial performance of the company. Through regular intervals, these governing bodies conduct comprehensive reviews to assess the companys progress and address any potential areas of concern.

SAL remains dedicated to maintaining strong internal control measures, supported by qualified professionals and a diligent monitoring process. By adhering to these practices, we strive to safeguard our assets, ensure accurate financial reporting, and drive overall organizational excellence.

HUMAN RESOURCES

In FY 2022-23, SAL continued to thrive with a highly committed, loyal, and dedicated team. Our company fosters an environment that promotes learning and encourages informal communication within the organization, enabling employees to grow both personally and professionally.

To objectively measure individual and organizational performance, SAL has implemented a robust Performance Management System (PMS). This system not only evaluates individual contributions but also aligns with the overall remuneration structure. By linking performance with rewards, we motivate our employees to strive for excellence.

Recognizing the importance of continuous learning and development, SAL has established a comprehensive training need identification system. This system identifies areas where employees can enhance their skills and knowledge, ensuring that they remain competent and up-to-date in their roles. This commitment to learning has made a significant contribution to the success of our company.

Throughout the year under review, employee relations remained affable, fostering a harmonious work environment. SAL has already signed a long-term settlement with the workers union, ensuring stability and positive collaboration.

In addition, we diligently adhered to all required safety norms across our entire company.

At SAL, we remain committed to nurturing our talented workforce, promoting a culture of continuous learning, and prioritizing the health and safety of our employees. These efforts contribute to our overall business success and reinforce our position as a responsible and caring organization.

Regular employee strength as on 31st March, 2023 stood at 294 (31st March 2022 - [262])

INDUSTRY STRUCTURE AND DEVELOPMENTS

In FY 2022-23, SAL continues to excel in the manufacturing and supply of seats, seat mechanisms, and agricultural implements to various manufacturers in the tractor, LCV, car, and agricultural product sectors. The performance of our company is closely tied to the performance of the automotive and agriculture industries. Over the past several years, the automotive industry has shown a positive growth trend. However, in FY 2022-23, the Indian auto industry witnessed a decline in production. A total of 2.59 crore vehicles, including passenger, commercial, three-wheelers, and two-wheelers, were produced during this period, compared to 2.30 crore vehicles in the previous financial year (2021-22), representing a growth of 11.20%. A segment-wise analysis reveals a growth in production across various segments during FY-22-23 (Source: SIAM website). Despite these challenges, SAL remains committed to delivering high-quality products and solutions to our customers. We closely monitor industry trends and adapt our strategies accordingly to navigate through market fluctuations. Our experienced team and dedication to excellence position us to overcome these obstacles and emerge stronger in the coming years.

OUTLOOK/OPPORTUNITIES

Both Automotive and Agri-Implement Industry looking forward for growths in upcoming years. Your company being supplier to OEMs also expected to grow in positive trends in upcoming years. Government policies and other economic factors also providing good purchasing power to rural and semi urban areas of the country which may lead to positive results for your company as well in upcoming years. The Automotive Mission 2026, a collective vision of the Industry and Government of India, aims to set a new trajectory for the evolution of the automotive industry ecosystem, taking into account its size, global footprint, technological maturity, competitiveness, and capabilities.

Furthermore, several other factors are poised to act as catalysts for industry growth. These include the governments continuous focus on strengthening the rural sector, infrastructure development, initiatives like Make in India and Skill India, the launch of new vehicle models by manufacturers, changing buying patterns, and replacement demand.

At SAL, we are closely monitoring these market dynamics and are prepared to adapt and capitalize on the opportunities that arise. By aligning our strategies with industry trends and leveraging our capabilities, we aim to navigate through these challenging times and contribute to the growth and success of the industry.

NEW DEVELOPMENTS

In FY 2022-23, SAL continued to contribute to the manufacturing industry in India, driven by the "Make in India" initiative of the Indian government. India is rapidly emerging as a manufacturing hub, and the automobile sector plays a prominent role in this transformation. Many international automobile giants have already established their manufacturing facilities in India, while others are in the process of doing so. The western and southern regions of India have become key hubs for the automobile sector, attracting both manufacturers and suppliers. SAL is actively exploring opportunities to set up new facilities near these manufacturing hubs, strengthening its focus on the auto ancillary business.

Recognizing the immense growth potential, SAL has ventured into another business segment, namely "Agriculture implements." This segment, primarily involving contract manufacturing of Rotavators, has contributed 55% to the companys revenue. The sustained demand from customers has led to substantial growth in this segment.

Furthermore, SAL is striving to expand its foot-print to include Indian Railway coach components, such as seats and berths. Currently, the company is executing development orders for Railways in the current year and actively pursuing opportunities to supply different types of berths to all coach factories of Indian Railways.

By expanding into these strategic business segments and exploring new avenues for growth, SAL Automotive Limited aims to leverage Indias manufacturing potential and diversify its product offerings. These initiatives align with the companys vision of expanding its presence and contributing to the overall development of the automotive and manufacturing industries in India.

THREATS, RISKS & CONCERNS

In FY 2022-23, SAL, as a supplier of components to tractor and automobile original equipment (OE) manufacturers, is directly influenced by the factors affecting these industries. Several factors can impact both the tractor and automobile sectors, including the quantum and distribution of rainfall, government policies on procurement, enforcement of safety and emission regulations, availability of credit, changes in interest rates, trends in commodity prices, and increasing competition.

In the short term, the automobile industry is experiencing a downturn due to various factors affecting demand from both urban and rural areas of India. While these factors may present challenges, SAL remains vigilant and adaptable to market dynamics. We closely monitor industry trends and customer requirements, enabling us to respond swiftly and effectively to changing demands.

As an organization, SAL is committed to maintaining strong relationships with our customers and adapting our strategies to meet their evolving needs. By staying attuned to the industry landscape and customer preferences, we position ourselves to navigate through short-term fluctuations and remain resilient in the face of challenges.

The details of changes in the key financial ratios as compared to previous year are stated below:

Sr. No Particulars 2022-23 2021-22 Change (%) Reason
1 Debtor Turnover Ratio 8.46 4.79 77% With better collections and improvement in credit management in line with increase in revenue.
2 Inventory Turnover Ratio 12.50 10.01 25% Inventory norms are maintained in line with segmental revenue.
3 Interest Coverage Ratio 2.60 (0.24) 1183% Healthier primarily due to increase in EBITDA.
4 Current Ratio 1.16 1.13 3% Improved with better management of Key Aspects.
5 Debt Equity Ratio 1.03 0.89 16% Increased primarily due to increase in borrowings in line with business operations.
6 Operating Profit Margin (percentage) 3.9 0.2 1850% Increased revenue helps to absorb fixed overheads resulting in increase in operating margin.
7. Net Profit / (Loss) / (percentage) 1.5 (1.6) 194% Increased revenue helps to absorb fixed overheads resulting in increase in operating margin.
8 Return on Net Worth (percemtage) 14.1 (7.4%) 291% Primarily due to increase in profits.

ACCOUNTING TREATMENT

The financial statements of the Company are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with the applicable Indian Accounting Standards.

CAUTIONARY STATEMENT

Statement in the Management Discussion and Analysis Report describing companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

For and on behalf of the Board
Rajiv Sharma
Chairman
Place: Ghaziabad DIN : 07418337
Date: 10th August, 2023

Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.